Marriage of Dall, In re

Decision Date30 May 1997
Docket NumberNo. 55A01-9606-CV-180,55A01-9606-CV-180
PartiesIn re the MARRIAGE OF Cynthia D. DALL, Appellant-Respondent, and Steven J. Dall, Appellee-Petitioner.
CourtIndiana Appellate Court
OPINION

NAJAM, Judge.

STATEMENT OF THE CASE

Cynthia D. Dall ("Wife") appeals from the property division portion of the decree which dissolved her marriage to Steven J. Dall ("Husband"). The sole issue presented for our review is whether the trial court abused its discretion when it included property that was titled in Wife's parents in the marital estate.

We reverse.

FACTS

The parties were married in 1983. Two children were born of the marriage, but no issues related to the children are involved in this appeal. Husband filed his dissolution petition in 1994, and the trial court entered its Decree of Dissolution of Marriage and Judgment in 1995.

Throughout the marriage, the Dalls received substantial financial contributions from Wife's parents. Wife's father, C.M. Walker ("Father"), suggested that the parties purchase a home. Father wanted his grandchildren to have a permanent, stable home in the area where he lived so that he and the Wife's mother ("Mother") could visit them.

The Dalls decided to build a home, and Father purchased a lot for $17,250.00. Father helped in the construction of the home, as he had experience in home building. Husband invested some 2,400 hours of his own labor in constructing the home, and Wife also contributed some effort in the construction. Father paid all the contractors and subcontractors and for the building materials. In all, Father and Mother spent approximately $93,000.00 to construct the home. Additionally, Father provided about 90 percent of the lumber used in the home from trees which were grown on his farm. Father and Mother loaned Husband and Wife approximately $5,300.00 to purchase appliances for the home, which Wife eventually repaid.

Father and Mother owned record title to the property. When the lot was first acquired, the parties agreed that title would be conveyed to Husband and Wife sometime in the future. However, Mother refused the couple's request to convey title during construction of the home, and the parties were unable to come to any agreement after that time. Husband and Wife were expected to pay the utilities, property taxes and homeowner's insurance. However, they failed to make all of the payments, and Father paid approximately $3,600.00 toward those bills.

A practice was established whereby Father would write Wife a check in the amount of $833.00 each month, and Wife would then issue Father a check in the same amount. This procedure was followed in order to establish a cash (cost) basis for the home should it ever be sold. During the couple's separation period, the court ordered Husband to make five monthly payments of $800.00 to Wife representing their "mortgage."

The trial court valued the home at $150,000.00, 1 included the home in the marital estate, and awarded it to Wife. Citing Sovern v. Sovern, 535 N.E.2d 563 (Ind.Ct.App.1989), the court found that "the marital estate has an interest in the real estate." Record at 140. In its plan of distribution, the court awarded Wife property with a net value of $145,899.02. Husband was awarded property with a negative net value of $7,414.92. The trial court found that Wife should be awarded 85 percent of the net marital estate due to the substantial contributions made by her parents. To accomplish this distribution, the court ordered that Wife pay Husband a judgment of $29,298.27 and that the judgment be secured by a mortgage on the marital residence. Wife now brings this appeal.

DISCUSSION AND DECISION
Standard of Review

When reviewing a claim that the trial court improperly divided marital property, we must decide whether the trial court's decision is clearly erroneous or constitutes an abuse of discretion. In re Marriage of Stetler, 657 N.E.2d 395, 398 (Ind.Ct.App.1995), trans. denied. Reversal is merited only where the trial court's decision is clearly against the logic and effect of the facts and circumstances before the court. Id. We may not reweigh the evidence or assess the credibility of witnesses, and we consider only the evidence most favorable to the trial court's disposition of marital property. Id.

Indiana Code § 31-1-11.5-11(c) 2 creates a rebuttable presumption that an equal division of property is just and reasonable. Hacker v. Hacker, 659 N.E.2d 1104, 1109 (Ind.Ct.App.1995). A trial court may deviate from an equal division provided that it sets forth a rational basis for its decision. Id.; see IND. CODE § 31-1-11.5-11(c). In reviewing a property division, we presume that the trial court considered and properly applied the statutory guidelines. Shumaker v. Shumaker, 559 N.E.2d 315, 318 (Ind.Ct.App.1990).

Inclusion of Residence in Marital Estate

Wife contends that the trial court erred when it included the residence in the marital estate. Husband counters that pursuant to Sovern, the dissolution court may properly determine that a divorcing couple owns an equitable interest in real property titled in a nonparty and include the value of that interest in the marital estate. See Sovern, 535 N.E.2d at 566. We conclude that our holding in Sovern should be confined to its unique and narrow facts and should not be followed.

In Sovern, the property in question consisted of the marital residence and an automobile body shop. The property was titled in the husband's parents who were not made parties to the dissolution proceeding. Id. at 565. The facts supporting the judgment reveal that while the parents held legal title to the property, the money used to construct the property was derived from the Soverns' marital resources. Id. The Soverns held themselves out as the owners of the property, the house was insured in both their names and their homeowner's policy reflected no insurable interest held by the parents. Id. Significantly, the parents claimed no interest in the property and were willing at all times during the Soverns' marriage to deed the property to them. Id.

Based on these facts, the trial court awarded the husband the residence and the body shop and awarded the wife a lump sum of $38,500.00 to compensate her for her interest in the property. Id. In affirming that award, this court stated that "[b]are legal title alone does not eliminate either the property or the investment thereon from being part of the marital estate to be considered by the Court in arriving at an equitable division." Id. Accordingly, we held that the trial court properly included the property in the marital estate. 3 Id. at 567.

In Sovern, the owners of the record title disclaimed any interest in the real estate. Here, Father testified that the parties had been unable to decide whether or when the property would be deeded to Husband and Wife. Record at 306-308. While Father originally intended to give the house to them, Mother had refused to agree to the transfer. Record at 310. Husband and Wife may have hoped eventually to acquire legal title to the property, but unlike the husband and wife in Sovern, they did not have a definite agreement that title would be transferred to them. In sum, neither Husband nor Wife possessed the definite interest necessary for the home to be included in the marital estate.

Our recent opinion in Hacker v. Hacker, 659 N.E.2d 1104 (Ind.Ct.App.1995), which was decided after the trial court issued its dissolution decree here, is controlling. In Hacker, we stated that "although a trial court in a dissolution proceeding may not award or otherwise divide property not owned by either of the parties, the court may consider a present possessory interest in distributing divisible assets." Id. at 1111 (emphasis added); see also Moore v. Moore, 482 N.E.2d 1176, 1179 (Ind.Ct.App.1985) (cars owned by wife's father were improperly included in marital estate, but her use of them could be considered in property distribution); Olds v. Olds, 531 N.E.2d 1219, 1220 (Ind.Ct.App.1988) (before property can be divided, a spouse must have a vested right in it).

In Hacker, the trial court initially included in the marital estate a family farm that the husband expected to inherit from his parents. Hacker, 659 N.E.2d at 1106. The couple had lived on the farm rent-free, although they had used their own marital resources to improve and repair the farm, for which they were not reimbursed. Id. In its findings, the trial court noted that the wife considered the couple to be equitable owners, and not renters, of the property, and further stated that the court "had the authority to include as a marital asset the parties' equitable interest in the farm ..." Id. at 1106-07. Accordingly, the court awarded the farm to the husband and awarded the wife a money judgment to compensate her for her interest in the property. Id. at 1106. After a motion to correct error, the trial court concluded that it had "mistakenly included in the property distribution property that was not part of the marital estate." Id. at 1107.

On appeal, we affirmed the trial court's decision to exclude the farm, stating unequivocally that an interest must be vested to warrant inclusion in the marital estate and division between the parties. Id. We explained:

Case law has long established that an unvested interest in property is not divisible as a marital asset.... No one has vested rights in an ancestor's property until the latter's death.... Even some vested interests, such as remainders in which the spouses have no present possessory interest, are deemed too remote to be included in a property settlement.

Id. (citations omitted). 4 Thus, an equitable interest in real property titled in a third-party, although claimed by one or both of the divorcing parties, should not be included in the marital estate. 5 Instead, the interest can be considered in dividing the...

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